Crypto Tax Guide – When do I pay Tax on Cryptocurrency?

Digital currency trading has grown significantly in the UK, attracting increased participation in investment, trading and profit-making through a variety of virtual assets.

HMRC expects tax to be paid on profits, capital gains, or income from cryptocurrency and you can use any losses to reduce your tax liability.

How you have made money from crypto determines the type of tax (either capital gains tax or income tax) you may need to pay.

Understanding tax on cryptocurrency is important, so you know how to calculate your gain or loss and the rate of crypto tax payable to HMRC.

Some crypto traders remain unaware that crypto profits incur tax liability and that omitting to declare gains risks HMRC sanctions.

By staying informed about HMRC cryptocurrency tax guidelines and maintaining accurate records, you can ensure compliance and potentially optimise your overall tax position.

Our tax on crypto guide will walk you through key essentials of crypto taxation in the UK, ensuring you’re well-equipped to handle your tax obligations.

Understanding crypto tax UK: Capital gains and income tax explained

When it comes to crypto tax UK regulations, HMRC treats cryptocurrencies as property for tax purposes.

This means your crypto activities could be subject to two main types of taxation:

• Capital gains tax (CGT): Applies when you make a profit from selling or trading your cryptocurrencies.
• Income tax: Relevant for earnings from crypto activities like mining, staking, or receiving payments in cryptocurrency.

Let’s break down each of these in more detail.

Calculating crypto capital gains tax

Cryptocurrency capital gains tax applies when you dispose of your digital assets, including selling, trading, or gifting to someone who isn’t your spouse or civil partner.

The annual tax-free allowance is £3,000 (which is subject to change).

CGT rates (which are subject to change) depend on your income tax band:

• Basic rate taxpayers: CGT rate 18%.
• Higher and additional rate taxpayers: CGT rate 24%.

Example: Let’s say you bought 1 Bitcoin for £20,000 and sold it later for £30,000. Your gain would be £10,000.

After deducting the £3,000 allowance, you’d pay CGT on £7,000. If you’re a basic rate taxpayer, your CGT bill would be £1260 (18% of £7,000).

When is income tax payable on crypto?

Income tax typically applies when you earn returns from particular crypto activities.

The majority of cryptocurrency earnings must be declared as “miscellaneous income” and are taxed at your standard income tax rate, calculated using the pound sterling value at the time of receipt, after deducting any eligible expenses.

Crypto income is taxed at your regular income tax rates:

• Basic rate: 20%.
• Higher rate: 40%.
• Additional rate: 45%.

HMRC guidelines state that the following transactions are generally subject to income tax:

• Receiving cryptocurrency as payment.
• Earnings from mining.
• Income from staking.
• Returns from liquidity pools.
• Profits from lending.
• Certain airdrop receipts.

Mining and staking rewards are considered income at the GBP value when received. If you later sell these coins, you may also need to pay CGT on any increase in value.

Example: If you earn £5,000 worth of cryptocurrency from staking, and you’re a basic rate taxpayer, you’d owe £1,000 in Income Tax (20% of £5,000).

Crypto capital gains tax annual allowance

You can use the capital gains tax annual allowance against crypto gains that are liable to CGT only.

The CGT annual exempt amount has been reduced to £3,000 per individual, down from £6,000 previously.

There isn’t a separate CGT annual allowance just for gains from crypto assets so any gains from other sources (from the same tax year) will need to be considered when using your CGT allowance.

Crypto losses can be used to offset other capital gains in the same tax year or you carry them forward to be used against a future gain.

Crypto trading allowance

A yearly trading allowance of £1,000 per person is available to use against crypto trading and miscellaneous earnings that are subject to income tax.

When your combined trading and miscellaneous revenue (from all sources not just crypto) in a tax year falls below £1,000 and you’re not otherwise self-employed, this income is income tax-exempt.

HMRC cryptocurrency tax: Key rules 

HMRC cryptocurrency tax guidelines treat digital assets as property for tax purposes.

Here are some key points to remember:

• Each crypto-to-crypto trade is a taxable event, not just crypto-to-fiat conversions.
• Simply buying and holding crypto doesn’t trigger a tax event. You only pay tax when you dispose of your crypto assets.
• using crypto to purchase goods or services is considered a disposal and may be subject to capital gains tax.
• NFTs are generally treated like other crypto assets for tax purposes, subject to CGT on disposal and potentially income tax if received as income.
• The “same day” and “30-day” rules usually apply when calculating capital gains, similar to share trading.

How to report crypto gains to HMRC

HMRC has data-sharing agreements with UK crypto exchanges, tracking transactions back to 2014.

Learning how to report crypto on taxes UK is crucial for compliance with HMRC regulations.

Here’s a step-by-step process:

• Keep detailed records: Track all your crypto transactions, including dates, amounts, and values in GBP.
• Calculate your gains and losses: Use the HMRC’s share pooling method to calculate your overall gain or loss for the tax year.
• Complete your tax return: Report your crypto gains on the capital gains summary section (SA108) of your self assessment tax return.
• Report crypto income: If you’ve earned crypto through mining, staking, or as payment, report this in the “Additional Information” section of your tax return.

Meet the SA deadlines. As an example for the 24/25 tax year the dates would be:

• Paper returns: 31 October 2025.
• Online returns: 31 January 2026.
• Income tax payable by: 31 January 2026.

UK crypto tax regulations: What investors need to know

UK crypto tax regulations are evolving, with HMRC providing increasingly clear guidance for investors.

Here are some key points:

• Airdrops: Taxed as income if received in return for a service, otherwise may be subject to CGT when sold.
• Hard forks: New coins received are not immediately taxable but may be subject to CGT when disposed of.
• Lost or stolen crypto: You may be able to claim a capital loss, but evidence is crucial.
• Gifting: Gifts to your spouse or civil partner are tax-free, but gifts to others may trigger CGT.

The crypto tax landscape in the UK continues to evolve with HMRC having to adapt their guidance on areas like DeFi activities and NFTs and future regulations around stablecoins and CBDCs (central bank digital currencies).

Stay informed about these changes to ensure ongoing compliance with UK crypto tax regulations.

You can use the HMRC crypto assets manual to find up to date information on their legislation for tax on cryptocurrency.

Crypto tax record-keeping best practices

Proper record-keeping is essential for accurate tax reporting. Here’s what you should track:

• Transaction dates.
• Type of transaction (buy, sell, trade, income).
• Number of units involved.
• Value of the transaction in GBP at the time.
• Cumulative total of investment units held.
• Bank statements and wallet addresses.

Crypto exchanges let you keep track of your transactions and maintain most of the records you need for tax purposes.

Using a cryptocurrency tax calculator UK can help you estimate your tax liabilities accurately and ensure you’re keeping the right records.

Crypto tax software

There’s a number of crypto tax software options available which can help you manage your record keeping and tax obligations.

Crypto tax software typically lets you import your crypto trading history so your capital gains and income tax bills can be calculated.

Third party crypto tax software is usually pretty straightforward for the end user and can integrate nicely with any accountancy packages you already use.

When is crypto tax free?

Some crypto transactions don’t incur a tax charge including:

Purchasing Crypto: When you purchase digital currencies and maintain ownership – commonly referred to as HODLing, this transaction isn’t subject to taxation whilst you retain the assets.

Documenting your initial purchase information is necessary so you can determine future profits or losses when a taxable sale occurs.

Buying Crypto with GBP: If you buy cryptocurrency using British pounds, no tax applies at the point of acquisition.

It’s essential to track these purchases meticulously to accurately calculate your capital gains or losses when you eventually sell the asset.

Transferring Crypto: Moving cryptocurrencies between your own personal crypto wallets and accounts doesn’t trigger any tax obligations.

These movements are tax-exempt as they’re not considered taxable events.

Maintaining detailed records of all transfers is vital for tax purposes and prevents any misclassification of these transactions as disposals.